Mohamed A. El-Erian , Columnist

Fed and Markets Resume Their Unhealthy Co-Dependency

Monetary policy is once again swamping factors like economic growth and geopolitics for traders, threatening financial stability.

December 21, 2023 at 11:30 AM UTC

By Mohamed A. El-Erian

Mohamed A. El-Erian is a Bloomberg Opinion columnist. A former chief executive officer of Pimco, he is president of Queens’ College, Cambridge; chief economic adviser at Allianz SE; and chair of Gramercy Fund Management. He is author of “The Only Game in Town.”

Christmas came early for markets this year.
Photographer: Angela Weiss/AFP via Getty Images

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The Federal Reserve was supposed to leave center stage by the end of the year and let other factors play the leading role in determining asset prices in the advanced world and beyond. Instead, it has written itself an encore act that’s full of confusion.

Monetary policy was often the only game in town when it came to determining market outcomes for much of the last 15 years. Central bank policy measures and statements (also known as forward policy guidance) as well as market expectations of what they would do and say had a disproportionate influence on asset prices; at times, meaningfully decoupling valuations from economic and geopolitical realities.